The Executive Board of the International Monetary Fund (IMF) announced that Saudi Arabia’s real GDP growth is expected to increase to 1.9 percent in 2018, with non-oil growth strengthening to 2.3 percent.
The Saudi Finance Ministry issued a statement Tuesday welcoming the results, commending the progress made in implementing Vision 2030 reform programs.
The IMF welcomed Saudi efforts to strengthen the public fiscal situation that helped reduce the financial deficit. The deficit is projected to continue to decrease to 4.6 percent of GDP in 2018 and to 1.7 percent in 2019.
The current account balance is expected to be in a surplus of 9.3 percent of GDP in 2018 as oil export revenues increase and remittance outflows remain subdued. The Saudi Arabian Monetary Authority’s (SAMA) net foreign assets are expected to increase this year and over the medium-term.
The IMF welcomed progress made to strengthen the medium-term fiscal framework, improving transparency and developing the overall Macro Fiscal Analysis.
Directors welcomed the new revenue measures, particularly the introduction of the VAT. They encouraged the authorities to continue their preparations to lower the VAT registration threshold in 2019. Directors welcomed the authorities’ intention to continue to gradually increase energy prices, but saw scope for more communication about the future price increases.
They emphasized the importance of ensuring that the payments through the citizens’ accounts are adequate to compensate low and middle-income households for the impact of the price increases.
It hailed the progress made in privatization plans and public-private partnerships and the creation of employment opportunities for citizens in the private sector, including policies aimed at enhancing the participation of women in the labor market.
It also welcomed the Saudi Arabian Monetary Authority (SAMA) for improving liquidity management, noting that banks enjoy good capital and high liquidity.
A bright future ahead
The report welcomed the authorities’ focus on financial development and inclusion. They agreed that increasing SME finance, improving financial sector access, particularly for women, and developing the debt market are priorities. They welcomed SAMA’s efforts to strengthen liquidity management.
Directors encouraged the authorities to continue to strengthen the effectiveness of their Anti-Money Laundering/Countering the Financing of Terrorism framework.
Directors agreed that the exchange rate peg to the US dollar continues to serve Saudi Arabia well given the structure of the Saudi economy.
It urged the continued implementation of structural reforms to improve the business environment, deepen the capital markets, increase funding for SMEs and implement privatization programs and public-private partnerships to achieve the objectives in Vision 2030. It underscored the importance of strengthening education and training and developing policies that create jobs for both males and females in the private sector.
Minister of Finance Mohammed al-Jadaan hailed the IMF’s findings, attributing the success to the directives of the Custodian of the Two Holy Mosques, King Salman bin Abdulaziz, and the follow-up and continuous supervision of Crown Prince Mohammed bin Salman, Deputy Prime Minister, Minister of Defense and Chairman of the Council of Economic Affairs and Development Affairs.
"We will continue our efforts to implement reform plans to diversify the economy and maintain public finances by raising the efficiency of public finance management, developing the state budget preparation procedures and improving financial and economic analyses,” he said.
He also vowed to implement the medium-term fiscal framework and manage expenditure ceilings until the year 2023 to achieve the best social, financial and economic returns and to improve transparency.
“There is still a lot of work to be done to ensure a successful future for the people and economy of the Kingdom in line with the aspirations of our wise leadership,” he added.
The Saudi economy, the largest in the Middle East, achieved a positive growth in the first quarter of this year, at 1.2 percent, a sign on the feasibility of economic reforms that are aimed at diversifying the economy and reducing oil dependency.
Saudi GDP rose 1.2 percent at the end of the first quarter to reach $172.7 billion compared to $170.7 billion during the same period last year, data showed.
Non-oil GDP increased 1.6 percent by the end of the first quarter of this year, reaching $98.9 billion.
GDP of the oil sector rose 0.6 percent to $72.8 billion compared to $72.4 billion of the first quarter of previous year.